Stop the bankruptcy of agricultural enterprises, cease the obliteration of the farmers

30.03.2016

Member of Parliament of Ukraine Andrii Derkach has forwarded an MP inquiry to the Prime Minister of Ukraine, wherein he calls upon the Government to immediately amend the effective legislation with a view to restoring the special tax regime for the farmers.

On Decemeber 4, 2015, the Verkhovna Rada, guided by the submission from the Cabinet of Ministers, adopted the amendments to the Tax Code of Ukraine in the section of taxation of the agricultural enterprises. According to most experts of the agricultural market, these legislative novations have created preconditions for the demolition of agriculture in the country and pose a great danger from the standpoint of ensuring Ukraine’s food security.

Andrii Derkach is certain that the special tax regime model for farmers, which had been effective until January 1, 2016, was the sole mechanism of state support of the rural areas, which had successfully operated with no “manual” interference and involved no corruption schemes. The following numbers support this assertion.

Last year, in Sumy Region the amount of VAT (Value-Added Tax) remained at the disposal of the agricultural facilities of the region. It equaled 2.288,98 million Hryvna (622, 1 million Hryvna in 2014). Furthermore, it was the farmers that ensured a significant increase in the funding of regional budgets on every level. In 2015, our farmers paid 521,9 million Hryvna in taxes, which is 226,1 million Hryvna, or 76,4%, more than for the same period of 2014. Of these sums, 418 million Hryvna were allocated to the local budgets.

Beginning January 1, 2016, new rules have been introduced for the agricultural enterprises enjoying the special regime: a portion of VAT must be paid to the state treasury with only a small percent of the tax being allocated to the special account of the enterprise (for instance, 85% of VAT on grain and industrial crops is to be distributed to the state budget, while the agricultural enterprise gets to keep 15%).

Furthermore, the fiscal burden on the farmers has also increased: the volume of a unified tax to be paid by the agricultural enterprises in 2016 has been increased by 2,2 times, compared to last year. Whereas, the indexation coefficient of regulatory monetary evaluation of the farmlands has been adjusted at 1,2.

During the registration of a tax bill, the farmers now have to transfer the whole sum of VAT, accrued from the operations with the specified sorts of agricultural products (grain, dairy, meat) to the appropriate supplementary account. Thereby, the current assets of the enterprise are also withdrawn, despite the fact that the product recyclers’ debt to the farmers is already increasing exponentially.

The repeal of special tax regime reduces the profitability of the export crops by 20%. If one adds the increase in interest on the loan for farmers, it makes the production of the aforementioned crops plainly unprofitable.

All the aforementioned factors pose a threat, because the cultivated areas of main export crops are soon expected to be reduced, while the enterprises that have no access to foreign markets will be on the brink of survival. Basically, they create ultra-comfortable conditions for the activity of large agricultural holdings in the country, whereas small and medium agricultural businesses are being eradicated. Meanwhile, the 2016 State Budget of Ukraine lacks any elements of state support for domestic agro-industrial complex.

Obviously, the adopted amendments are unacceptable to the agricultural enterprises and will inevitably result in the loss of current assets, decrease of competitive ability of the agricultural business, and growth in the net cost of agricultural production. Furthermore, the funding of budgets on every level will also decrease, which might result in many local budgets suffering a fatal hit.

”This law will result in the bankruptcy of many agricultural enterprises. The agriculture provides millions of people with jobs and the agricultural exports amount for 30% of foreign exchange earnings in the country. The obliteration of farmers means not only loss of jobs and export earnings, but the destruction of Ukrainian rural area as well.

Thievish and irresponsible so-called “democratic” coalition has conducted the de-industrialization of the country. “Activists” and “intourists” have destroyed the industry. In Sumy Region alone they managed to wipe out 20.000 jobs.

At the moment, the Cabinet of Ministers, consisting of henchmen of said “intourists”, is meticulously destroying the rural area and farmers for the purpose of cheap buyout of land, which is laid down in its program.

I would like to remind our “eurointegrators” that the preservation of special tax regime for farmers until January 1, 2018, is provided in the coalition agreement and the Action Plan on Executing the Action Program of the Government. The benefits for agriculture are laid down in the Ukraine-EU Association Agreement, in accordance with the norms of WTO”, Andrii Derkach underscored in his commentary.

The MP inquiry was announced at the Verkhovna Rada session on Friday, February 18, 2016.